by Calculated Risk on 10/09/2011 11:51:00 AM

• From the Financial Times: Merkel and Sarkozy hold talks on crisis German Chancellor Angela Merkel and French President Nicolas Sarkozy are holding the talks today in Berlin on the financial crisis. A key point is trying to agree on how to recapitalize European banks. Merkel is pushing for a solution prior to the Oct 17th and 18th summit of European leaders in Brussels.

• From the WSJ: Belgium, France to Nationalize Part of Dexia

The governments of Belgium and France agreed to nationalize the Belgian subsidiary of Dexia SA, paving the way for the embattled Belgian-French lender to be broken up.

If Merkel and Sarkozy wait too long, the markets will force an ad-hoc approach.

• From Reuters: Barroso says Greek default would spread crisis: paper

"If we give up on Greece, there is a big danger that the crisis will spread to other countries," [European Commission President Jose Manuel Barroso] told Bild in an interview to be published on Monday ... "This is new territory for us and we are discussing solutions which have not really been tested before," he said.

But the European Union was convinced that a Greek bankruptcy was "not cheaper for all participants than the current aid schemes," he said.

The next two weeks are critical for Europe.

Yesterday:
• Summary for Week Ending Oct 7th
• Schedule for Week of Oct 9th